The Most Successful Management Is to Create Family-like Bonds Among All the Members in an Enterprise

Interviewers Song and Tsui: Do you see much conflict between renqing (personal favour and reciprocity) among family members and business ethics in family firms? How may a family firm deal with employee relationships among ‘affection, reason and rules or regulations?’ What is the relationship between law and renqing in managing an enterprise?

Guo: Modern management theories show a huge bias when they assume that family firms are full of conflicts between renqing and business ethics, accusing family firms of having overcomplicated interpersonal relationships and practising nepotism. While I agree that bias exists, and that we cannot achieve sustainable development in these firms until we can address these inherent problems, I see no point in eliminating affection and friendship in family firms. As I see it, the most successful management is not to eliminate affection and friendship, but rather to create a family-like bond among all the members in an enterprise. In the sense that blood relationships are inherent in family firms, I believe family firms are superior to non-family firms. Therefore, studying this special type of enterprise will surely bring fruitful results in both economics and management theory.

The law refers to tangible management that can be embodied by power and rights; renqing is intangible management. As intangible management is more effective than tangible management, renqing must be a more effective management means than the law. I think patriarchs of successful family firms must understand that the key to their success lies in renqing. A great family-firm leader needs to build up a modern corporate system and achieve business success simultaneously on the grounds of renqing.

Interviewers Song and Tsui: Behind each successful enterprise is a unique strategy or management style. What factors do you think influence HC’s success?

Guo: Since both strategies and management can be imitated, they are not core competencies. Entrepreneurs are the scarcest resources of any enterprise, and they are also the most invaluable assets of HC. Some say that the most important determinant of business success is neither capital nor technology, but talent. But many enterprises have failed in spite of having those factors: they died suddenly, at their peak. These cases prove at least one basic truth: something is more important than funds, technology and talent. That ‘something’ is the core competency in an enterprise.

HC’s unique management style and strategies stem from our performance-based profit-sharing system. How could HC excel even without top-down managerial interventions? The answer is that we rely on renqing, corporate culture, business ethics, autonomy and the voluntariness of our employees. Truly great management transcends tangible management to become intangible management. Only an enterprise that can complete such a transformation has a chance of becoming a world- class enterprise.

Enterprises that can continually turn numbers of talented employees into insiders are bound to succeed. Such a transition tests an entrepreneur’s leadership capabilities. In a successful family firm, family-like affection is the inner core of its corporate culture, and culture is the scale of this affection. To cultivate family-like bonds among all enterprise members is the basic duty of entrepreneurs, and to regulate and standardise affection is a test of entrepreneurial leadership capability. Entrepreneurs are like parents to their enterprises, responsible for nurturing and raising the company. However, specific managerial approaches cannot purposefully create both culture and affection in a family firm. Rather, that must evolve during the course of independent and unique enterprise development. Actually, management itself is embodied by corporate culture, and corporate culture generally contains a certain degree of affection and renqing.

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